Basic Search

[...]

(2.2) No deduction may be made under subsection (1), (2) or 138(6) in computing the taxable income of a particular corporation in respect of a dividend received on a share of the capital stock of a corporation that was issued after 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987 where

• (a) a person or partnership (in this subsection and subsection (2.21) referred to as the “guarantor”) that is a specified financial institution or a specified person in relation to a specified financial institution, but that is not the issuer of the share or an individual other than a trust, is, at or immediately before the time the dividend was received, obligated, either absolutely or contingently and either immediately or in the future, to effect any undertaking (in this subsection and subsections (2.21) and (2.22) referred to as a “guarantee agreement”), including any guarantee, covenant or agreement to purchase or repurchase the share and including the lending of funds to or the placing of amounts on deposit with, or on behalf of, the particular corporation or any specified person in relation to the particular corporation given to ensure that

  [...]

• (b) the guarantee agreement was given as part of a transaction or event or a series of transactions or events that included the issuance of the share.

(2.21) Subsection (2.2) does not apply to a dividend received by a particular corporation on

• [...]

• (c) a taxable preferred share issued after December 15, 1987 and of a class of the capital stock of a corporation that is listed on a designated stock exchange where all guarantee agreements in respect of the share were given by one or more of the issuer of the share and persons that are related (otherwise than because of a right referred to in paragraph 251(5)(b)) to the issuer unless, at the time the dividend is paid to the particular corporation, dividends in respect of more than 10 per cent of the issued and outstanding shares to which the guarantee agreement applies are paid to the particular corporation or the particular corporation and specified persons in relation to the particular corporation; or

• (d) a share

  • [...]

  • (ii) in respect of which the guarantee agreement was not given in the ordinary course of the guarantor’s business, and

(2.22) For the purposes of subsections (2.2) and (2.21),

• (a) where a guarantee agreement in respect of a share is given at any particular time after 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987, otherwise than under a written arrangement to do so entered into before 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987, the share is deemed to have been issued at the particular time and the guarantee agreement is deemed to have been given as part of a series of transactions that included the issuance of the share; and

[...]

(2.4) No deduction may be made under subsection 112(1) or 112(2) or subsection 138(6) in computing the taxable income of a particular corporation in respect of a dividend received on a share (in this subsection referred to as the “subject share”), other than an exempt share, of the capital stock of another corporation where

• (a) any person or partnership was obligated, either absolutely or contingently, to effect an undertaking, including any guarantee, covenant or agreement to purchase or repurchase the subject share, under which an investor is entitled, either immediately or in the future, to receive or obtain any amount or benefit for the purpose of reducing the impact, in whole or in part, of any loss that an investor may sustain by virtue of the ownership, holding or disposition of the subject share, and any property is used, in whole or in part, either directly or indirectly in any manner whatever, to secure the undertaking; or

[...]

(2.6) For the purposes of this subsection and subsection 112(2.4),

exempt share

exempt share  means

• [...]

• (b) a share of the capital stock of a corporation issued before 5:00 p.m. Eastern Standard Time, November 27, 1986, other than a share held at that time

  • [...]

  • (ii) by any person or partnership where the issuer may become entitled to receive any amount after that time by way of subscription proceeds or contribution of capital with respect to that share pursuant to an agreement made before that time, or

Marginal note:Change in agreement or condition

(2.7) For the purposes of the definition exempt share in subsection 112(2.6), where at any time after 5:00 p.m. Eastern Standard Time, November 27, 1986 the terms or conditions of a share of the capital stock of a corporation have been changed or any agreement in respect of the share has been changed or entered into by the corporation, the share shall be deemed to have been issued at that time.

[...]

(4.1) For the purpose of section 10, the fair market value at any time of a share of the capital stock of a corporation is deemed to be equal to the fair market value of the share at that time, plus

• (a) where the shareholder is a corporation, the total of all amounts received by the shareholder on the share before that time each of which is

  • (i) a taxable dividend, to the extent of the amount of the dividend that was deductible under this section, section 113 or subsection 115(1) or 138(6) in computing the shareholder’s taxable income or taxable income earned in Canada for any taxation year, or

• (b) where the shareholder is a partnership, the total of all amounts each of which is a dividend received by the shareholder on the share before that time; and

• (c) where the shareholder is an individual and the corporation is resident in Canada, the total of all amounts each of which is a dividend received by the shareholder on the share before that time (or, where the shareholder is a trust, that would have been so received if this Act were read without reference to subsection 104(19)).

Marginal note:Fair market value of shares held as inventory — excluded dividends

(4.11) A qualified dividend shall not be included in the total determined under paragraph (4.1)(a), (b) or (c) if the shareholder establishes that

• (a) it was received while the shareholder and persons with whom the shareholder was not dealing at arm’s length did not hold in total more than 5% of the issued shares of any class of the capital stock of the corporation from which the dividend was received; and

• (b) it was received on a share that the shareholder held throughout the 365-day period that ended at the time referred to in subsection 112(4.1).

[...]

(7) Where a share (in this subsection referred to as the “new share”) has been acquired in exchange for another share (in this subsection referred to as the “old share”) in a transaction to which section 51, 85.1, 86 or 87 applies, for the purposes of the application of any of subsections 112(3) to 112(3.32) in respect of a disposition of the new share, the new share is deemed to be the same share as the old share, except that

• (a) any dividend received on the old share is deemed for those purposes to have been received on the new share only to the extent of the proportion of the dividend that

  • (i) the shareholder’s adjusted cost base of the new share immediately after the exchange

  [...]

  • (ii) the shareholder’s adjusted cost base of all new shares immediately after the exchange acquired in exchange for the old share; and

• (b) the amount, if any, by which a loss from the disposition of the new share is reduced because of the application of this subsection shall not exceed the proportion of the shareholder’s adjusted cost base of the old share immediately before the exchange that

  • (i) the shareholder’s adjusted cost base of the new share immediately after the exchange

  [...]

  • (ii) the shareholder’s adjusted cost base of all new shares, immediately after the exchange, acquired in exchange for the old share.

95 (1) In this Subdivision,

controlled foreign affiliate

controlled foreign affiliate , at any time, of a taxpayer resident in Canada, means

• [...]

• (b) a foreign affiliate of the taxpayer that would, at that time, be controlled by the taxpayer if the taxpayer owned

  • [...]

  • (iii) all of the shares of the capital stock of the foreign affiliate that are owned at that time by the persons (each of whom is referred to in this definition as a “relevant Canadian shareholder”), in any set of persons not exceeding four (which set of persons shall be determined without reference to the existence of or the absence of any relationship, connection or action in concert between those persons), who

    [...]

  • (iv) all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons who do not deal at arm’s length with any relevant Canadian shareholder; (société étrangère affiliée contrôlée)

designated liquidation and dissolution

designated liquidation and dissolution , of a foreign affiliate (referred to in this definition as the “disposing affiliate”) of a taxpayer, means a liquidation and dissolution of the disposing affiliate in respect of which

• [...]

• (b) both

  • (i) the percentage determined by the following formula is greater than or equal to 90%:

    A/B

    where

    A 

    is the amount, if any, by which

    • (A) the total of all amounts each of which is the fair market value, at the time at which it is distributed, of a property that is distributed by the disposing affiliate, in respect of shares of the capital stock of the disposing affiliate, in the course of the liquidation and dissolution to one particular shareholder of the disposing affiliate that was, immediately before the time of the distribution, a foreign affiliate of the taxpayer

    [...]

    • (B) the total of all amounts each of which is an amount owing (other than an unpaid dividend) by, or an obligation of, the disposing affiliate that was assumed or cancelled by the particular shareholder in consideration for a property referred to in clause (A), and

    B 

    is the amount, if any, by which

    • (A) the total of all amounts each of which is the fair market value, at the time at which it is distributed, of a property that is distributed by the disposing affiliate, in respect of shares of the capital stock of the disposing affiliate, to a shareholder of the disposing affiliate in the course of the liquidation and dissolution

    [...]

    • (B) the total of all amounts each of which is an amount owing (other than an unpaid dividend) by, or an obligation of, the disposing affiliate that was assumed or cancelled by a shareholder of the disposing affiliate in consideration for a property referred to in clause (A), and

  • (ii) at the time of each distribution of property by the disposing affiliate in the course of the liquidation and dissolution in respect of shares of the capital stock of the disposing affiliate, the particular shareholder holds shares of that capital stock that would, if an annual general meeting of the shareholders of the disposing affiliate were held at that time, entitle it to 90% or more of the votes that could be cast under all circumstances at the meeting, or

• (c) one particular shareholder of the disposing affiliate that was, throughout the liquidation and dissolution, a foreign affiliate of the taxpayer owns not less than 90% of the issued shares of each class of the capital stock of the disposing affiliate throughout the liquidation and dissolution; (liquidation et dissolution désignées)

excluded property

excluded property , at a particular time, of a foreign affiliate of a taxpayer means any property of the foreign affiliate that is

• [...]

• (c.1) property arising under or as a result of an agreement that

  • [...]

  • (ii) either

    • (A) can reasonably be considered to have been made by the affiliate to reduce its risk, with respect to an amount that was receivable under an agreement that relates to the sale of excluded property or with respect to an amount that was receivable and was a property described in paragraph (c), of fluctuations in the value of the currency in which the amount receivable was denominated, or

    • (B) can reasonably be considered to have been made by the affiliate to reduce its risk, with respect to any of the following amounts, of fluctuations in the value of the currency in which that amount was denominated:

      • (I) an amount that was payable under an agreement that relates to the purchase of property that (at all times between the time of the acquisition of the property and the particular time) is excluded property of the affiliate,

[...]

foreign accrual tax

foreign accrual tax  applicable to any amount included under subsection 91(1) in computing a taxpayer’s income for a taxation year of the taxpayer in respect of a particular foreign affiliate of the taxpayer means, subject to subsection 91(4.1),

• (a) the portion of any income or profits tax that may reasonably be regarded as applicable to that amount and that is paid by

  • [...]

  • (ii) another foreign affiliate (in paragraph (b) referred to as the “shareholder affiliate”) of the taxpayer where

    [...]

• (b) any amount prescribed in respect of the particular affiliate or the shareholder affiliate, as the case may be, to be foreign accrual tax applicable to that amount; (impôt étranger accumulé)

investment business

investment business  of a foreign affiliate of a taxpayer means a business carried on by the foreign affiliate in a taxation year (other than a business deemed by subsection (2) to be a business other than an active business carried on by the foreign affiliate and other than a non-qualifying business of the foreign affiliate) the principal purpose of which is to derive income from property (including interest, dividends, rents, royalties or any similar returns or substitutes for such interest, dividends, rents, royalties or returns), income from the insurance or reinsurance of risks, income from the factoring of trade accounts receivable, or profits from the disposition of investment property, unless it is established by the taxpayer or the foreign affiliate that, throughout the period in the taxation year during which the business was carried on by the foreign affiliate,

• [...]

• (c) the operator employs

  • [...]

  • (ii) the equivalent of more than five employees full time in the active conduct of the business taking into consideration only

    • [...]

    • (B) the services provided outside Canada to the operator by any one or more persons each of whom is, during the time at which the services were performed by the person, an employee of

      • [...]

      • (II) in the case where the operator is the affiliate,

        1 a corporation (referred to in this subparagraph as a “providing shareholder”) that is a qualifying shareholder of the affiliate,

        [...]

    if the corporations referred to in subclause (B)(I) and the designated corporations, designated partnerships, providing shareholders or providing members referred to in subclauses (B)(II) and (III) receive compensation from the operator for the services provided to the operator by those employees the value of which is not less than the cost to those corporations, partnerships, shareholders or members of the compensation paid or accruing to the benefit of those employees that performed the services during the time at which the services were performed by those employees; (entreprise de placement)

lease obligation

lease obligation  of a person includes an obligation under an agreement that authorizes the use of or the production or reproduction of property including information or any other thing; (obligation découlant d’un bail)

non-qualifying country

non-qualifying country , at any time, means a country or other jurisdiction

• (a) with which Canada neither has a tax treaty at that time nor has, before that time, signed an agreement that will, on coming into effect, be a tax treaty,

• [...]

• (b) with which Canada does not have a comprehensive tax information exchange agreement that is in force and has effect at that time, and

• (c) with which Canada has, more than 60 months before that time, either

  • (i) begun negotiations for a comprehensive tax information exchange agreement (unless that time is before 2014 and Canada was, on March 19, 2007, in the course of negotiating a comprehensive tax information exchange agreement with that jurisdiction), or

  • (ii) sought, by written invitation, to enter into negotiations for a comprehensive tax information exchange agreement (unless that time is before 2014 and Canada was, on March 19, 2007, in the course of negotiating a comprehensive tax information exchange agreement with that jurisdiction); (pays non admissible)

Marginal note:British Virgin Islands

(1.1) For the purposes of paragraph (b) of the definition non-qualifying country in subsection (1), the British Overseas Territory of the British Virgin Islands is deemed to have a comprehensive tax information exchange agreement with Canada that is in force and has effect after 2013 and before March 11, 2014.

(2) For the purposes of this Subdivision,

• (a) in computing the income or loss from an active business for a taxation year of a particular foreign affiliate of a taxpayer in respect of which the taxpayer has a qualifying interest throughout the year or that is a controlled foreign affiliate of the taxpayer throughout the year, there shall be included any income or loss of the particular foreign affiliate for the year from sources in a country other than Canada that would otherwise be income or loss from property of the particular foreign affiliate for the year to the extent that

  • [...]

  • (ii) the income or loss is derived from amounts that were paid or payable, directly or indirectly, to the particular foreign affiliate or a partnership of which the particular foreign affiliate was a member

    • [...]

    • (D) by another foreign affiliate (referred to in this clause as the “second affiliate”) of the taxpayer — in respect of which the taxpayer has a qualifying interest throughout the year — to the extent that the amounts are paid or payable by the second affiliate, in respect of any particular period in the year, under a legal obligation to pay interest in respect of

      [...]

      • [...]

      • (IV) in respect of each of the second affiliate and the third affiliate, for each of their taxation years (each of which is referred to in this subclause as a “relevant taxation year”) that end in the year, either

        [...]

        2 the members or shareholders of that affiliate (which, for the purposes of this sub-subclause, includes a person that has, directly or indirectly, an interest, or for civil law a right, in a share of the capital stock of, or in an equity interest in, the affiliate) at the end of that relevant taxation year are subject to income taxation in a country other than Canada on, in aggregate, all or substantially all of the income of that affiliate for that relevant taxation year in their taxation years in which that relevant taxation year ends,

  • [...]

  • (vi) the income or loss is derived by the particular foreign affiliate under or as a result of an agreement that provides for the purchase, sale or exchange of currency and that can reasonably be considered to have been made by the particular foreign affiliate to reduce

    [...]

• [...]

• (a.21) for the purposes of paragraph (a.2), one or more risks insured by a foreign affiliate of a taxpayer that, if this Act were read without reference to this paragraph, would not be specified Canadian risks (in this paragraph referred to as the foreign policy pool ) are deemed to be specified Canadian risks if

  • (i) the affiliate, or a person or partnership that does not deal at arm’s length with the affiliate, enters into one or more agreements or arrangements in respect of the foreign policy pool,

  • (ii) the affiliate’s risk of loss or opportunity for gain or profit in respect of the foreign policy pool, in combination with its risk of loss or opportunity for gain in respect of the agreements or arrangements, can reasonably be considered to be — or could reasonably be considered to be if the affiliate had entered into the agreements or arrangements entered into by the person or partnership — determined, in whole or in part, by reference to one or more criteria in respect of one or more risks insured by another person or partnership (in this paragraph referred to as the tracked policy pool ), which criteria are

    [...]

• (a.22) if the conditions in paragraph (a.21) are satisfied in respect of a foreign affiliate of a taxpayer, or a foreign affiliate of another taxpayer if that other taxpayer does not deal at arm’s length with the taxpayer, and a particular foreign affiliate of the taxpayer, or a partnership of which the particular affiliate is a member, has entered into one or more agreements or arrangements described in that paragraph,

  • (i) activities performed in connection with those agreements or arrangements are deemed to be a separate business, other than an active business, carried on by the particular affiliate to the extent that those activities can reasonably be considered to be performed for the purpose of obtaining the result described in subparagraph (a.21)(ii), and

• [...]

• (a.24) for the purposes of paragraph (a.2),

  • [...]

  • (ii) if the particular affiliate — or a foreign affiliate of another taxpayer, if that other taxpayer or affiliate, or a partnership of which that other taxpayer or affiliate is a member, does not deal at arm’s length with the particular affiliate — enters into one or more agreements or arrangements in respect of the risk,

    • (A) activities performed in connection with those agreements or arrangements are deemed to be a separate business, other than an active business, carried on by the particular affiliate or other affiliate, as the case may be, and

• [...]

• (e) notwithstanding subsection 69(5), if at any time a foreign affiliate (referred to in this paragraph as the “shareholder affiliate”) of a taxpayer receives a property (referred to in this paragraph as the “distributed property”) from another foreign affiliate (referred to in this paragraph as the “disposing affiliate”) of the taxpayer on a liquidation and dissolution of the disposing affiliate and the distributed property is received in respect of shares of the capital stock of the disposing affiliate that are disposed of on the liquidation and dissolution,

  • (i) the distributed property is deemed to have been disposed of at that time by the disposing affiliate to the shareholder affiliate for proceeds of disposition equal to the relevant cost base to the disposing affiliate of the distributed property in respect of the taxpayer, immediately before that time, if

    [...]

  • (ii) if subparagraph (i) does not apply to the distributed property, the distributed property is deemed to have been disposed of at that time by the disposing affiliate to the shareholder affiliate for proceeds of disposition equal to the distributed property’s fair market value at that time,

  • (iii) the distributed property is deemed to have been acquired, at that time, by the shareholder affiliate at a cost equal to the amount determined under subparagraph (i) or (ii) to be the disposing affiliate’s proceeds of disposition of the distributed property,

  • (iv) each share of a class of the capital stock of the disposing affiliate that is disposed of by the shareholder affiliate on the liquidation and dissolution of the disposing affiliate is deemed to be disposed of for proceeds of disposition equal to

    • (A) if the liquidation and dissolution is a designated liquidation and dissolution of the disposing affiliate

      • (I) where the amount that would, if clause (B) applied, be determined under that clause in respect of the share is greater than or equal to the adjusted cost base of the share to the shareholder affiliate immediately before the disposition, that adjusted cost base, or

      • (II) where the adjusted cost base of the share to the shareholder affiliate immediately before the disposition exceeds the amount that would, if clause (B) applied, be determined under that clause in respect of the share

        1 if the share is not excluded property of the shareholder affiliate, that adjusted cost base, and

        [...]

    • (B) in any other case, the amount determined by the formula

      (A – B)/C

      where

      A 

      is the total of all amounts each of which is the cost to the shareholder affiliate of a distributed property, as determined under subparagraph (iii), received, at any time, in respect of the class,

      B 

      is the total of all amounts each of which is an amount owing (other than an unpaid dividend) by, or an obligation of, the disposing affiliate that was assumed or cancelled by the shareholder affiliate in consideration for the distribution of a distributed property referred to in the description of A, and

      C 

      is the total number of issued and outstanding shares of the class that are owned by the shareholder affiliate during the liquidation and dissolution, and

  • (v) if the liquidation and dissolution is a designated liquidation and dissolution of the disposing affiliate,

    • (A) the shareholder affiliate is deemed to be the same corporation as, and a continuation of, the disposing affiliate for the purposes of applying

      • (I) this subsection and the definition foreign accrual property income in subsection (1) with respect to any disposition by the shareholder affiliate of any property to which clause (i)(A) applied,

    • (B) for the purposes of the description of A.2 in the definition foreign accrual property income in subsection (1), the amount, if any, determined for G in respect of the disposing affiliate for its first taxation year that ends after the beginning of the liquidation and dissolution is to be added to the amount otherwise determined for G in respect of the shareholder affiliate for its taxation year that immediately precedes its taxation year that includes the time at which the liquidation and dissolution began;

• [...]

• (f.15) for the purposes of applying subparagraph (f)(i), the references in subsection 39(2) to “Canadian currency” are to be read as “the taxpayer’s calculating currency”

  • [...]

  • (ii) in respect of an agreement described in subparagraph (i)(iii) entered into by a foreign affiliate of a taxpayer, or a partnership of which the foreign affiliate is a member;

• [...]

• (g.01) any income, loss, capital gain or capital loss, derived by a foreign affiliate of a taxpayer under or as a result of an agreement that provides for the purchase, sale or exchange of currency and that can reasonably be considered to have been made by the foreign affiliate to reduce its risk (with respect to any source, any particular income, gain or loss determined in reference to which is deemed by paragraph (g) to be nil) of fluctuations in the value of currency, is, to the extent of the absolute value of the particular income, gain or loss, deemed to be nil;

• [...]

• (i) any income, gain or loss of a foreign affiliate of a taxpayer or of a partnership of which a foreign affiliate of a taxpayer is a member (which foreign affiliate or partnership is referred to in this paragraph as the “debtor”), for a taxation year or fiscal period of the debtor, as the case may be, is deemed to be income, a gain or a loss, as the case may be, from the disposition of an excluded property of the debtor, if the income, gain or loss is

  • [...]

  • (iii) derived under or as a result of an agreement that provides for the purchase, sale or exchange of currency and that can reasonably be considered to have been made by the debtor to reduce its risk, with respect to a debt referred to in subparagraph (i) or (ii), of fluctuations in the value of the currency in which the debt was denominated;

• [...]

• (m) a taxpayer has a qualifying interest in respect of a foreign affiliate of the taxpayer at any time if, at that time, the taxpayer owned

  [...]

  • (iii) where, at any time, shares of a corporation are owned or are deemed for the purposes of this paragraph to be owned by another corporation (in this paragraph referred to as the “holding corporation”), those shares shall be deemed to be owned at that time by each shareholder of the holding corporation in a proportion equal to the proportion of all such shares that

    • (A) the fair market value of the shares of the holding corporation owned at that time by the shareholder

    [...]

• [...]

• (p) a particular person is a qualifying shareholder of a corporation at any time if throughout the period, in the taxation year of the corporation that includes that time, during which the particular person was a shareholder of the corporation

  [...]

• [...]

• (s) in applying the definition investment business in subsection (1), a particular corporation is, at any time, a designated corporation in respect of a foreign affiliate of a taxpayer, if at that time

  • (i) a qualifying shareholder of the foreign affiliate or a person related to such a qualifying shareholder is a qualifying shareholder of the particular corporation,

  • (ii) the particular corporation

    • (A) is controlled by a qualifying shareholder of the foreign affiliate, or

    • (B) would be controlled by a particular qualifying shareholder of the foreign affiliate if the particular qualifying shareholder of the foreign affiliate owned each share of the capital stock of the particular corporation that is owned by a qualifying shareholder of the foreign affiliate or by a person related to a qualifying shareholder of the foreign affiliate, and

  • (iii) the total of all amounts each of which is the fair market value of a share of the capital stock of the particular corporation owned by a qualifying shareholder of the foreign affiliate or by a person related to a qualifying shareholder of the foreign affiliate is greater than 50% of the total fair market value of all the issued and outstanding shares of the capital stock of the particular corporation;

• [...]

• (v) in applying paragraph (p),

  • (i) where shares of the capital stock of any corporation (referred to in this paragraph as the “issuing corporation”) are, at any time, owned by a corporation (referred to in this paragraph as the “holding corporation”) or are deemed under this paragraph to be, at any time, owned by a corporation (referred to in this paragraph as the “holding corporation”), those shares are deemed to be owned at that time by each shareholder of the holding corporation in a proportion equal to the proportion of those shares that

    • (A) the fair market value, at that time, of the shares of the capital stock of the issuing corporation that are owned by the shareholder

    [...]

  • (ii) a person who is deemed by subparagraph (i) to own, at any time, shares of the capital stock of a corporation is deemed to be, at that time, a shareholder of the corporation;

(2.01) In applying paragraph (b) of the definition controlled foreign affiliate in subsection (1) and in applying this subsection,

• (a) shares of the capital stock of a corporation that are at any time owned by, or that are deemed by this subsection to be at any time owned by, another corporation are deemed to be, at that time, owned by, or property of, as the case may be, each shareholder of the other corporation in the proportion that

  • (i) the fair market value at that time of the shares of the capital stock of the other corporation that, at that time, are owned by, or are property of, the shareholder

  [...]

[...]

Marginal note:Rule for definition investment business

(2.1) For the purposes of the definition investment business in subsection 95(1), a foreign affiliate of a taxpayer, the taxpayer and, where the taxpayer is a corporation all the issued shares of which are owned by a corporation described in subparagraph 95(2.1)(a)(i), such corporation described in subparagraph 95(2.1)(a)(i) shall be considered to be dealing with each other at arm’s length in respect of the entering into of agreements that provide for the purchase, sale or exchange of currency and the execution of such agreements where

• [...]

• (b) the agreements are swap agreements, forward purchase or sale agreements, forward rate agreements, futures agreements, options or rights agreements or similar agreements;

• (c) the affiliate entered into the agreements in the course of a business carried on by the affiliate, if

  [...]

• (d) the terms and conditions of such agreements are substantially the same as the terms and conditions of similar agreements made by persons dealing at arm’s length.

[...]

(2.43) The following definitions apply in this subsection and subsections (2.44) and (2.45).

eligible currency hedge

eligible currency hedge , of an eligible bank affiliate of an eligible Canadian bank, means an agreement that provides for the purchase, sale or exchange of currency and that

[...]

[...]

(2.5) For the purpose of paragraph 95(2)(a.3),

indebtedness

indebtedness  does not include obligations of a particular person under agreements with non-resident corporations providing for the purchase, sale or exchange of currency where

• (a) the agreements are swap agreements, forward purchase or sale agreements, forward rate agreements, futures agreements, options or rights agreements, or similar agreements,

• [...]

• (c) the agreements are entered into by the non-resident corporation in the course of a business conducted principally with persons with whom the non-resident corporation deals at arm’s length, if

  [...]

• (d) the terms and conditions of such agreements are substantially the same as the terms and conditions of similar agreements made by persons dealings at arm’s length; (dette)

[...]

(11) If this subsection applies in respect of a foreign affiliate (referred to in this subsection as the “actual affiliate”) of a taxpayer for a taxation year of the actual affiliate, the following rules apply for the purpose of determining the amounts, if any, to be included under subsection 91(1), and to be deducted under subsection 91(4), by the taxpayer in respect of the year and for the purpose of applying section 233.4 in respect of the year:

• [...]

• (e) each shareholder of the actual affiliate is deemed to own, at the end of the year, that number of shares of the single class that is equal to the product of 100 and the amount that would be the aggregate participating percentage (as defined in subsection 91(1.3)) of that shareholder in respect of the actual affiliate for the year if

  • (i) the actual affiliate were a controlled foreign affiliate of that shareholder at the end of the year,

[...]

Marginal note:Idem

(10.4) Where a taxpayer has, after April 19, 1983, made a payment or loan described in paragraph (a) of the definition agreed portion in subsection 66(15) to a joint exploration corporation in respect of which the corporation has at any time renounced in favour of the taxpayer any Canadian exploration expenses, Canadian development expenses or Canadian oil and gas property expenses (in this subsection referred to as “resource expenses”) under subsection 66(10.1), 66(10.2) or 66(10.3), the following rules apply:

[...]

[...]

Marginal note:Control

(11.3) For the purposes of subsections 66(11) and 66.7(10), where a corporation acquired control of another corporation after November 12, 1981 and before 1983 by reason of the acquisition of shares of the other corporation pursuant to an agreement in writing concluded on or before November 12, 1981, it shall be deemed to have acquired that control on or before November 12, 1981.

[...]

(12) In computing a taxpayer’s Canadian exploration and development expenses,

• (a) there shall be deducted any amount paid to the taxpayer before May 7, 1974

  • [...]

  • (ii) pursuant to any agreement entered into between the taxpayer and Her Majesty in right of Canada under the Northern Mineral Grants Program or the Development Program of the Department of Indian Affairs and Northern Development, to the extent that the amount has been expended by the taxpayer as or on account of Canadian exploration and development expenses incurred by the taxpayer; and

[...]

Marginal note:Unitized oil or gas field in Canada

(12.2) Where, pursuant to an agreement between a taxpayer and another person to unitize an oil or gas field in Canada, an amount has become receivable by the taxpayer at a particular time after May 6, 1974 from that other person in respect of Canadian exploration expense incurred by the taxpayer or Canadian exploration and development expenses incurred by the taxpayer (or expenses that would have been Canadian exploration and development expenses if they had been incurred by the taxpayer after 1971 and before May 7, 1974) in respect of that field or any part thereof, the following rules apply:

[...]

Marginal note:Idem

(12.3) Where, pursuant to an agreement between a taxpayer and another person to unitize an oil or gas field in Canada, an amount has become receivable by the taxpayer at a particular time after May 6, 1974 from that other person in respect of Canadian development expense incurred by the taxpayer in respect of that field or any part thereof, the following rules apply:

[...]

[...]

Marginal note:Unitized oil or gas field in Canada

(12.5) Where, pursuant to an agreement between a taxpayer and another person to unitize an oil or gas field in Canada, an amount has become receivable by the taxpayer at a particular time from that other person in respect of Canadian oil and gas property expense incurred by the taxpayer in respect of that field or any part thereof, the following rules apply:

[...]

Marginal note:Canadian exploration expenses to flow-through shareholder

(12.6) If a person gave consideration under an agreement to a corporation for the issue of a flow-through share of the corporation and, in the period that begins on the day on which the agreement was made and ends 24 months after the end of the month that includes that day, the corporation incurred Canadian exploration expenses (other than an expense deemed by subsection 66.1(9) to be a Canadian exploration expense of the corporation), the corporation may, after it complies with subsection (12.68) in respect of the share and before March of the first calendar year that begins after the period, renounce, effective on the day on which the renunciation is made or on an earlier day set out in the form prescribed for the purpose of subsection (12.7), to the person in respect of the share the amount, if any, by which the portion of those expenses that was incurred on or before the effective date of the renunciation (which portion is in this subsection referred to as the “specified expenses”) exceeds the total of

• [...]

• (b.2) if the agreement is made after March 2023, all specified expenses that are not described in paragraph (b) or (b.1) and that would be Canadian exploration expenses if

  [...]

[...]

Marginal note:COVID-19 – time extension to 36 months

(12.6001) The references to “24 months” in subsections (12.6) and (12.62) are to be read as references to “36 months” in respect of agreements entered into after February 2018 and before 2021.

(12.601) Where

• (a) a person gave consideration under an agreement to a corporation for the issue of a flow-through share of the corporation,

• [...]

• (b) during the period beginning on the particular day the agreement was entered into and ending on the earlier of December 31, 2018 and the day that is 24 months after the end of the month that included that particular day, the corporation incurred Canadian development expenses (excluding expenses that are deemed by subsection (12.66) to have been incurred on December 31, 2018) described in paragraph (a) or (b) of the definition Canadian development expense in subsection 66.2(5) or that would be described in paragraph (f) of that definition if the words “paragraphs (a) to (e)” in that paragraph were read as “paragraphs (a) and (b)”,

[...]

[...]

Marginal note:Canadian development expenses to flow-through shareholder

(12.62) Where a person gave consideration under an agreement to a corporation for the issue of a flow-through share of the corporation and, in the period that begins on the day the agreement was made and ends 24 months after the end of the month that includes that day, the corporation incurred Canadian development expenses, the corporation may, after it complies with subsection 66(12.68) in respect of the share and before March of the first calendar year that begins after the period, renounce, effective on the day on which the renunciation is made or on an earlier day set out in the form prescribed for the purposes of subsection 66(12.7), to the person in respect of the share the amount, if any, by which the part of those expenses that was incurred on or before the effective date of the renunciation (which part is in this subsection referred to as the “specified expenses”) exceeds the total of

• [...]

• (b.2) if the agreement is made after March 2023, all specified expenses that are not described in paragraph (b) or (b.1) and that would be Canadian development expenses if the definition mineral resource in subsection 248(1) were read without reference to its paragraphs (a) and (d), and

[...]

[...]

(12.66) Where

• (a) a corporation that issues a flow-through share to a person under an agreement incurs, in a particular calendar year, Canadian exploration expenses or Canadian development expenses,

• (a.1) the agreement was made in the preceding calendar year,

[...]

[...]

Marginal note:Prohibited relationship

(12.671) For the purposes of subsection 66(12.67), where a trust, corporation (in paragraph 66(12.671)(b) referred to as the “shareholder corporation”) or partnership, as the case may be, gave consideration under a particular agreement for the issue of a flow-through share of a particular corporation, the particular corporation has, in respect of a renunciation under subsection 66(12.6) or 66(12.601) in respect of the share, a prohibited relationship

• (a) with the trust if, at any time after the particular agreement was entered into and before the share is issued to the trust, the particular corporation or any corporation related to the particular corporation is beneficially interested in the trust;

• (b) with the shareholder corporation if, immediately before the particular agreement was entered into, the shareholder corporation was related to the particular corporation; or

• (c) with the partnership if any part of the amount renounced would, but for subsection 66(12.7001), be included, because of paragraph (h) of the definition Canadian exploration expense in subsection 66.1(6), in the Canadian exploration expense of

  • [...]

  • (ii) any other corporation that, at any time

    • (A) after the particular agreement was entered into, and

    would, if flow-through shares issued by the particular corporation under agreements entered into at the same time as or after the time the particular agreement was entered into were disregarded, be related to the particular corporation.

Marginal note:Filing selling instruments

(12.68) A corporation that agrees to issue or prepares a selling instrument in respect of flow-through shares shall file with the Minister a prescribed form together with a copy of the selling instrument or agreement to issue the shares on or before the last day of the month following the earlier of

• (a) the month in which the agreement to issue the shares is entered into, and

[...]

[...]

Marginal note:COVID-19 – agreements in 2019 or 2020

(12.731) If an agreement is entered into in 2019 or 2020 by a corporation to issue flow-through shares of the corporation,

[...]

[...]

(15) In this section,

agreed portion

agreed portion  in respect of a corporation that was a shareholder corporation of a joint exploration corporation means such amount as may be agreed on between the joint exploration corporation and the shareholder corporation not exceeding

• (a) the total of all amounts each of which is a payment or loan referred to in paragraph (b) of the definition shareholder corporation in this subsection 66(15) except to the extent that the payment or loan was made by a shareholder corporation that was not a Canadian corporation and was used by the joint exploration corporation to acquire a Canadian resource property after December 11, 1979 from a shareholder corporation that was not a Canadian corporation) made by the shareholder corporation to the joint exploration corporation during the period it was a shareholder corporation of the joint exploration corporation,

[...]

• (b) the total of the amounts, if any, previously renounced by the joint exploration corporation under any of subsections 66(10) to 66(10.3) in favour of the shareholder corporation; (partie convenue)

Canadian exploration and development expenses

Canadian exploration and development expenses  incurred by a taxpayer means any expense incurred before May 7, 1974 that is

• [...]

• (e) any expense incurred by the taxpayer after 1971 pursuant to an agreement with a corporation under which the taxpayer incurred the expense solely in consideration for shares of the capital stock of the corporation issued to the taxpayer by the corporation or any interest in such shares or right thereto, to the extent that the expense was incurred as or on account of the cost of

  [...]

[...]

flow-through share

flow-through share  means a share (other than a prescribed share) of the capital stock of a principal-business corporation, or a right (other than a prescribed right) to acquire a share of the capital stock of a principal-business corporation, issued to a person under an agreement in writing made between the person and the corporation under which the corporation, for consideration that does not include property to be exchanged or transferred by the person under the agreement in circumstances to which any of sections 51, 85, 85.1, 86 and 87 applies, agrees

• (a) to incur, in the period that begins on the day on which the agreement was made and ends 24 months after the month that includes that day, Canadian exploration expenses or Canadian development expenses in an amount not less than the consideration for which the share or right is to be issued, and

foreign exploration and development expenses

foreign exploration and development expenses  incurred by a taxpayer means

[...]

• [...]

• (l) an expenditure made after February 27, 2000 by the taxpayer unless the expenditure was made

  • (i) pursuant to an agreement in writing made by the taxpayer before February 28, 2000,

joint exploration corporation

joint exploration corporation  means a principal-business corporation that has not at any time since its incorporation had more than 10 shareholders, not including any individual holding a share for the sole purpose of qualifying as a director; (société d’exploration en commun)

shareholder corporation

shareholder corporation  of a joint exploration corporation means a corporation that for the period in respect of which the expression is being applied

• (a) was a shareholder of the joint exploration corporation, and

specified foreign exploration and development expense

specified foreign exploration and development expense  of a taxpayer in respect of a country (other than Canada) means an amount that is included in the taxpayer’s foreign exploration and development expenses and that is

• [...]

• (a.1) an expense incurred by the taxpayer after December 21, 2000 (otherwise than pursuant to an agreement in writing made before December 22, 2000) for the purpose of determining the existence, location, extent or quality of a mineral resource in that country, including any expense incurred in the course of

  [...]

• (b) a prospecting, exploration or development expense incurred by the taxpayer before December 22, 2000 (or after December 21, 2000 pursuant to an agreement in writing made before December 22, 2000) in searching for minerals in that country,

[...]

Marginal note:Associated corporations

(2.3) Notwithstanding subsection 18(2.2), if all of the corporations that are associated with each other in a taxation year have filed with the Minister in prescribed form an agreement whereby, for the purposes of this section, they allocate an amount to one or more of them for the taxation year and the amount so allocated or the total of the amounts so allocated, as the case may be, does not exceed $1,000,000, the base level deduction for the year for each of the corporations is the base level deduction that would be computed under subsection 18(2.2) in respect of the corporation if the reference in that subsection to $1,000,000 were read as a reference to the amount so allocated to it.

Marginal note:Failure to file agreement

(2.4) If any of the corporations that are associated with each other in a taxation year has failed to file with the Minister an agreement as contemplated by subsection 18(2.3) within 30 days after notice in writing by the Minister has been forwarded to any of them that such an agreement is required for the purpose of any assessment of tax under this Part, the Minister shall, for the purpose of this section, allocate an amount to one or more of them for the taxation year, which amount or the total of which amounts, as the case may be, shall equal $1,000,000 and in any such case, the amount so allocated to any corporation shall be deemed to be an amount allocated to the corporation pursuant to subsection 18(2.3).

[...]

(3) In subsection 18(2),

interest on debt relating to the acquisition of land

interest on debt relating to the acquisition of land  includes

• [...]

• (b) interest paid or payable in the year by a taxpayer in respect of borrowed money that may reasonably be considered (having regard to all the circumstances) to have been used to assist, directly or indirectly,

  • [...]

  • (ii) a corporation of which the taxpayer is a specified shareholder, or

  [...]

(3.1) Notwithstanding any other provision of this Act, in computing a taxpayer’s income for a taxation year,

• (a) no deduction shall be made in respect of any outlay or expense made or incurred by the taxpayer (other than an amount deductible under paragraph 20(1)(a), 20(1)(aa) or 20(1)(qq) or subsection 20(29)) that can reasonably be regarded as a cost attributable to the period of the construction, renovation or alteration of a building by or on behalf of the taxpayer, a person with whom the taxpayer does not deal at arm’s length, a corporation of which the taxpayer is a specified shareholder or a partnership of which the taxpayer’s share of any income or loss is 10% or more and relating to the construction, renovation or alteration, or a cost attributable to that period and relating to the ownership during that period of land

  [...]

• (b) the amount of such an outlay or expense shall, to the extent that it would otherwise be deductible in computing the taxpayer’s income for the year, be included in computing the cost or capital cost, as the case may be, of the building to the taxpayer, to the person with whom the taxpayer does not deal at arm’s length, to the corporation of which the taxpayer is a specified shareholder or to the partnership of which the taxpayer’s share of any income or loss is 10% or more, as the case may be.

(3.2) For the purposes of subsection 18(3.1), costs relating to the construction, renovation or alteration of a building or to the ownership of land include

• [...]

• (b) interest paid or payable by a taxpayer in respect of borrowed money that may reasonably be considered (having regard to all the circumstances) to have been used to assist, directly or indirectly,

  • [...]

  • (ii) a corporation of which the taxpayer is a specified shareholder, or

  [...]

[...]

(3.5) Subsection 18(3.1) does not apply in respect of an outlay or expense in respect of a building or the land described in subparagraph 18(3.1)(a)(i) or 18(3.1)(a)(ii) in respect of the building,

• [...]

• (d) if, in the case of a new building being constructed in Canada, the taxpayer was obligated to construct the building under the terms of an agreement in writing entered into before November 13, 1981 and arrangements, evidenced in writing, respecting the construction of the building were substantially advanced before June 1, 1982 and the installation of footings or other base support for the building commenced before 1983,

[...]

[...]

(5) Notwithstanding any other provision of this Act (other than subsection (5.1)), in this subsection and subsections (4) and (5.1) to (6.1),

equity amount

equity amount , of a corporation or trust for a taxation year, means

• (a) in the case of a corporation resident in Canada, the total of

  • [...]

  • (ii) the average of all amounts each of which is the corporation’s contributed surplus (other than any portion of that contributed surplus that arose at a time when the corporation was non-resident, or that arose in connection with a disposition to which subsection 212.1(1.1) applies or an investment, as defined in subsection 212.3(10), to which subsection 212.3(2) applies) at the beginning of a calendar month that ends in the year, to the extent that it was contributed by a specified non-resident shareholder of the corporation, and

  • (iii) the average of all amounts each of which is the corporation’s paid-up capital at the beginning of a calendar month that ends in the year, excluding the paid-up capital in respect of shares of any class of the capital stock of the corporation owned by a person other than a specified non-resident shareholder of the corporation,

outstanding debts to specified non-residents

outstanding debts to specified non-residents , of a corporation or trust at any particular time in a taxation year, means

• (a) the total of all amounts each of which is an amount outstanding at that time as or on account of a debt or other obligation to pay an amount

  • (i) that was payable by the corporation or trust to a person who was, at any time in the year,

    • (A) a specified non-resident shareholder of the corporation or a specified non-resident beneficiary of the trust, or

    • (B) a non-resident person who was not dealing at arm’s length with a specified shareholder of the corporation or a specified beneficiary of the trust, as the case may be, and

[...]

specified non-resident shareholder

specified non-resident shareholder of a corporation at any time means a specified shareholder of the corporation who was at that time a non-resident person or a non-resident-owned investment corporation; (actionnaire non-résident déterminé)

specified shareholder

specified shareholder of a corporation at any time means a person who at that time, either alone or together with persons with whom that person is not dealing at arm’s length, owns

• (a) shares of the capital stock of the corporation that give the holders thereof 25% or more of the votes that could be cast at an annual meeting of the shareholders of the corporation, or

and for the purpose of determining whether a particular person is a specified shareholder of a corporation at any time, where the particular person or a person with whom the particular person is not dealing at arm’s length has at that time a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingently

[...]

Marginal note:Specified shareholder or specified beneficiary

(5.1) For the purposes of subsections (4) to (6), if

• (a) a particular person would, but for this subsection, be a specified shareholder of a corporation or a specified beneficiary of a trust at any time,

• (b) there was in effect at that time an agreement or arrangement under which, on the satisfaction of a condition or the occurrence of an event that it is reasonable to expect will be satisfied or will occur, the particular person will cease to be a specified shareholder of the corporation or a specified beneficiary of the trust, and

• (c) the purpose for which the particular person became a specified shareholder or specified beneficiary was the safeguarding of rights or interests of the particular person or a person with whom the particular person is not dealing at arm’s length in respect of any indebtedness owing at any time to the particular person or a person with whom the particular person is not dealing at arm’s length,

the particular person is deemed not to be a specified shareholder of the corporation or a specified beneficiary of the trust, as the case may be, at that time.

Marginal note:Specified shareholder or specified beneficiary

(5.2) For the purposes of subsections (4) to (6), a non-resident corporation is deemed to be a specified shareholder of itself and a non-resident trust is deemed to be a specified beneficiary of itself.

[...]

(6) Subsection (6.1) applies at any time in respect of a taxpayer if at that time

• [...]

• (d) the total of all amounts — each of which is, in respect of the particular debt or other obligation, an amount outstanding as or on account of an intermediary debt or the fair market value of a particular property described in subparagraph (c)(ii) — is equal to at least 25% of the total of

  • [...]

  • (ii) the total of all amounts each of which is an amount (other than the particular amount) that the taxpayer, or a person that does not deal at arm’s length with the taxpayer, has outstanding as or on account of a debt or other obligation to pay an amount to the intermediary under the agreement, or an agreement that is connected to the agreement, under which the particular debt or other obligation was entered into if

    [...]

[...]

(9.1) Subject to subsection 142.4(10), where at any time a payment, other than a payment that

• [...]

• (b) is contingent or dependent on the use of or production from property or is computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion or by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation,

[...]

[...]

(11) Notwithstanding any other provision of this Act, in computing the income of a taxpayer for a taxation year, no amount is deductible under paragraph 20(1)(c), 20(1)(d), 20(1)(e), 20(1)(e.1) or 20(1)(f) in respect of borrowed money (or other property acquired by the taxpayer) in respect of any period after which the money (or other property) is used by the taxpayer for the purpose of

• (a) making a payment after November 12, 1981 as consideration for an income-averaging annuity contract, unless the contract was acquired pursuant to an agreement in writing entered into before November 13, 1981;

[...]

[...]

(13) Subsection 18(15) applies, subject to subsection 142.6(7), when

• [...]

• (e) the particular property is a share, or a loan, bond, debenture, mortgage, hypothecary claim, note, agreement for sale or any other indebtedness;

[...]

Marginal note:Deemed identical property

(16) For the purposes of subsections (13), (14) and (15), a right to acquire a property (other than a right, as security only, derived from a mortgage, hypothec, agreement for sale or similar obligation) is deemed to be a property that is identical to the property.

(17) The following definitions apply in this subsection and subsections (18) to (23).

position

position , of a person or partnership, means one or more properties, obligations or liabilities of the person or partnership, if

• (a) each property, obligation or liability is

  • [...]

  • (vi) a swap agreement, a forward purchase or sale agreement, a forward rate agreement, a futures agreement, an option agreement or a similar agreement,

87 (1) In this section, an amalgamation means a merger of two or more corporations each of which was, immediately before the merger, a taxable Canadian corporation (each of which corporations is referred to in this section as a “predecessor corporation”) to form one corporate entity (in this section referred to as the “new corporation”) in such a manner that

• [...]

• (c) all of the shareholders (except any predecessor corporation), who owned shares of the capital stock of any predecessor corporation immediately before the merger, receive shares of the capital stock of the new corporation because of the merger,

[...]

(1.1) For the purposes of paragraph 87(1)(c) and the Income Tax Application Rules, where there is a merger of

[...]

any shares of the capital stock of a predecessor corporation owned by a shareholder (except any predecessor corporation) immediately before the merger that were not cancelled on the merger shall be deemed to be shares of the capital stock of the new corporation received by the shareholder by virtue of the merger as consideration for the disposition of the shares of the capital stock of the predecessor corporations.

[...]

(3.1) Where,

• [...]

• (c) immediately after the amalgamation, the number of shareholders of each substituted class, the number of shares of each substituted class owned by each shareholder, the number of issued shares of each substituted class, the terms and conditions of each share of a substituted class, and the paid-up capital of each substituted class determined without reference to the provisions of this Act are identical to the number of shareholders of the exchanged class from which the substituted class was converted, the number of shares of each such exchanged class owned by each shareholder, the number of issued shares of each such exchanged class, the terms and conditions of each share of such exchanged class, and the paid-up capital of each such exchanged class determined without reference to the provisions of this Act, respectively, immediately before the amalgamation, and

[...]

Marginal note:Shares of predecessor corporation

(4) Where there has been an amalgamation of two or more corporations after May 6, 1974, each shareholder (except any predecessor corporation) who, immediately before the amalgamation, owned shares of the capital stock of a predecessor corporation (in this subsection referred to as the “old shares”) that were capital property to the shareholder and who received no consideration for the disposition of those shares on the amalgamation, other than shares of the capital stock of the new corporation (in this subsection referred to as the “new shares”), shall be deemed

• (a) to have disposed of the old shares for proceeds equal to the total of the adjusted cost bases to the shareholder of those shares immediately before the amalgamation, and

• (b) to have acquired the new shares of any particular class of the capital stock of the new corporation at a cost to the shareholder equal to that proportion of the proceeds described in paragraph 87(4)(a) that

  • (i) the fair market value, immediately after the amalgamation, of all new shares of that particular class so acquired by the shareholder,

  [...]

  • (ii) the fair market value, immediately after the amalgamation, of all new shares so acquired by the shareholder,

except that, where the fair market value of the old shares immediately before the amalgamation exceeds the fair market value of the new shares immediately after the amalgamation and it is reasonable to regard any portion of the excess (in this subsection referred to as the “gift portion”) as a benefit that the shareholder desired to have conferred on a person related to the shareholder, the following rules apply:

• (c) the shareholder shall be deemed to have disposed of the old shares for proceeds of disposition equal to the lesser of

  • (i) the total of the adjusted cost bases to the shareholder, immediately before the amalgamation, of the old shares and the gift portion, and

• (d) the shareholder’s capital loss from the disposition of the old shares shall be deemed to be nil, and

• (e) the cost to the shareholder of any new shares of any class of the capital stock of the new corporation acquired by the shareholder on the amalgamation shall be deemed to be that proportion of the lesser of

  • (i) the total of the adjusted cost bases to the shareholder, immediately before the amalgamation, of the old shares, and

  • (ii) the total of the fair market value, immediately after the amalgamation, of all new shares so acquired by the shareholder and the amount that, but for paragraph 87(4)(d), would have been the shareholder’s capital loss from the disposition of the old shares

  [...]

  • (iii) the fair market value, immediately after the amalgamation, of the new shares of that class so acquired by the shareholder

  [...]

  • (iv) the fair market value, immediately after the amalgamation, of all new shares so acquired by the shareholder,

and where the old shares were taxable Canadian property of the shareholder, the new shares are deemed to be, at any time that is within 60 months after the amalgamation, taxable Canadian property of the shareholder.

(4.1) For the purposes of the definition term preferred share in subsection 248(1), where there has been an amalgamation of two or more corporations after November 16, 1978 and a share of any class of the capital stock of the new corporation (in this subsection referred to as the “new share”) was issued in consideration for the disposition of a share of any class of the capital stock of a predecessor corporation (in this subsection referred to as the “exchanged share”) and the terms and conditions of the new share were the same as, or substantially the same as, the terms and conditions of the exchanged share,

• [...]

• (b) if the exchanged share was issued under an agreement in writing, the new share shall be deemed to have been issued under that agreement; and

Marginal note:Idem

(4.2) Where there has been an amalgamation or merger of two or more corporations after November 27, 1986 and a share of any class of the capital stock of the new corporation (in this subsection referred to as the “new share”) was issued to a shareholder in consideration for the disposition of a share by that shareholder of any class of the capital stock of a predecessor corporation (in this subsection referred to as the “exchanged share”) and the terms and conditions of the new share were the same as, or substantially the same as, the terms and conditions of the exchanged share, for the purposes of applying the provisions of this subsection, subsections 112(2.2) and 112(2.4), Parts IV.1 and VI.1, section 258 and the definitions grandfathered share, short-term preferred share, taxable preferred share and taxable RFI share in subsection 248(1) to the new share, the following rules apply:

• [...]

• (c) the new share shall be deemed to have been acquired by the shareholder at the time the exchanged share was acquired by the shareholder;

• [...]

• (f) where the terms or conditions of the exchanged share or an agreement in respect of the exchanged share specify an amount in respect of the exchanged share for the purposes of subsection 191(4) and an amount equal to the amount so specified in respect of the exchanged share is specified in respect of the new share for the purposes of subsection 191(4),

  • [...]

  • (iii) where the shareholder received no consideration for the disposition of the exchanged share other than the new share, for the purposes of subsection 191(4),

    [...]

Marginal note:Exchanged rights

(4.3) Where there has been an amalgamation or merger of two or more corporations after June 18, 1987 and a right listed on a designated stock exchange to acquire a share of any class of the capital stock of the new corporation (in this subsection referred to as the “new right”) was acquired by a shareholder in consideration for the disposition of a right described in paragraph (d) of the definition grandfathered share in subsection 248(1) to acquire a share of any class of the capital stock of a predecessor corporation (in this subsection referred to as the “exchanged right”), the new right shall be deemed to be the same right as the exchanged right for the purposes of paragraph (d) of the definition grandfathered share in subsection 248(1) where the terms and conditions of the new right were the same as, or substantially the same as, the terms and conditions of the exchanged right and the terms and conditions of the share receivable on an exercise of the new right were the same as, or substantially the same as, the terms and conditions of the share that would have been received on an exercise of the exchanged right.

(4.4) Where

• [...]

• (b) a predecessor corporation entered into an agreement with a person at a particular time for consideration given by the person to the predecessor corporation,

• (c) for the consideration under the agreement

  [...]

[...]

• (e) the person shall be deemed to have given the consideration under the agreement to the new corporation for the issue of the new share,

• (f) the agreement shall be deemed to have been entered into between the new corporation and the person at the particular time,

[...]

(7) Where there has been an amalgamation of two or more corporations after May 6, 1974 and

[...]

• [...]

• (d) shall apply as if the new corporation had incurred or issued the debt or other obligation at the time it was incurred or issued by the predecessor corporation under the agreement made on the day on which the predecessor corporation made an agreement under which the debt or other obligation was issued,

[...]

[...]

(8.2) For the purposes of the definition foreign merger in subsection (8.1), if there is a merger or combination, otherwise than as a result of the distribution of property to one corporation on the winding-up of another corporation, of two or more non-resident corporations (each of which is referred to in this subsection as a “predecessor foreign corporation”), as a result of which one or more predecessor foreign corporations ceases to exist and, immediately after the merger or combination, another predecessor foreign corporation (referred to in this subsection as the “survivor corporation”) owns properties (except amounts receivable from, or shares of the capital stock of, any predecessor foreign corporation) representing all or substantially all of the fair market value of all such properties owned by each predecessor foreign corporation immediately before the merger or combination, then

• [...]

• (f) all of the shares of the capital stock of each predecessor foreign corporation (other than the survivor corporation) that were outstanding immediately before the merger or combination and that cease to exist as a consequence of the merger or combination are deemed to be exchanged by the shareholders of each such predecessor corporation for shares of the survivor corporation as a consequence of the merger or combination.

[...]

(8.4) Subsection (8.5) applies at any time if

• [...]

• (c) no shareholder (except any predecessor foreign corporation) that owned shares of the capital stock of a predecessor foreign corporation immediately before the foreign merger received consideration for the disposition of those shares on the foreign merger, other than shares of the capital stock of the new foreign corporation;

[...]

Marginal note:Rules applicable in respect of certain mergers

(9) Where there has been a merger of two or more taxable Canadian corporations to form a new corporation that was controlled, immediately after the merger, by a taxable Canadian corporation (in this subsection referred to as the “parent”) and, on the merger, shares of the capital stock of the parent (in this subsection referred to as “parent shares”) were issued by the parent to persons who were, immediately before the merger, shareholders of a predecessor corporation, the following rules apply:

• (a) for the purposes of paragraph 87(1)(c), subsection 87(4) and the Income Tax Application Rules, any parent shares received by a shareholder of a predecessor corporation shall be deemed to be shares of the capital stock of the new corporation received by the shareholder by virtue of the merger;

• (a.1) for the purposes of subsections 87(4.1) and 87(4.2), a parent share issued to a shareholder in consideration for the disposition of a share of a class of the capital stock of a predecessor corporation shall be deemed to be a share of a class of the capital stock of the new corporation that was issued in consideration for the disposition of a share of a class of the capital stock of a predecessor corporation by that shareholder;

• [...]

• (a.21) for the purpose of paragraph (4.4)(d)

  • (i) each parent share received by a shareholder of a predecessor corporation is deemed to be a share of the capital stock of the new corporation issued to the shareholder by the new corporation on the merger, and

• [...]

• (b) in computing, at any particular time, the paid-up capital in respect of any particular class of shares of the capital stock of the parent that included parent shares immediately after the merger

  • (i) there shall be deducted that proportion of the amount, if any, by which the paid-up capital, determined without reference to this paragraph, in respect of all the shares of the capital stock of the parent immediately after the merger exceeds the total of all amounts each of which is the paid-up capital in respect of a share of the capital stock of the parent or a predecessor corporation (other than any share of a predecessor corporation owned by the parent or by another predecessor corporation and any share of a predecessor corporation owned by a shareholder other than the parent or another predecessor corporation that was not exchanged on the merger for parent shares) immediately before the merger that

    [...]